How can I break into buy and hold with too much debt

Question

Hello, I currently work 2 full time times (no fun) and make about 180k a year gross. I have about 40k in my 401k (Which I could take 20k out for a loan for a downpayment). My wife didn't work for a over a year and now works a minimal wage job. I've have about 50k in credit card bills and my current mortgage is 3k a month. I also have a student loan and 2 car notes. I would like to get buy and hold property(s) maybe in Jacksonville, FL since the prices there are pretty low compared to Maryland where I live. What can I do know to make that happen with my current situation? All the loans I see are debt to income based. Please help.

Thomas S. · Answer

Down size, adjust to a frugal life style, pay off all bad debt...credit cards and student loans, sell the cars and buy affordable vehicles with cash.With a income of 180K /year this should be easy to achieve in a reasonably short period of time if you are dedicated to your goals. Reality is that most people can live on 50% of their income if they are driven to change. Bggest hurdle is curbing wasteful spending and getting family in line with your goals.

Caleb Heimsoth · Answer

@Jeff Johnson must be a large house to have a 3k a month mortgage. I would recommend downsizing the house, and paying off student and credit card debt. If you have that much credit card debt your credit score probably isn’t great

David S. · Answer

What @Thomas S. said. Honestly, if you can learn to enjoy the challenge of dropping your debt every month rather than view it as a burden, that's the key. Make a spreadsheet/chart and print it out; "TOTAL DEBT", then stick it to the wall and chart your progress. Have the wife help. Give yourself a reward if you get half way, something that entices the wife too but doesn't cost that much... Now do it.

Jacob K. · Answer

Jeff -- depends where you are looking in Montgomery County. If you look a bit further north in Montgomery County, there are nice townhomes for mid 300's. Depends where you're actually working vs where you want to live.

Louis Bratton · Answer

The biggest/fastest thing you could do is either rent or sale your house and rent for a year. That will fix the debt to income issue then you can qualify.

Adam Greene · Answer

Jeff Johnson, I do like debt consolidation loans with 50k in CC debt you might find that just consolidating that into a personal loan will both raise your score and likely lower your payments.. You could alternatively look at commercial multi-family, there are loans for those so long as the property can support the debt.. a fair bit to learn.. If your personal risk level is up for it, and you are willing to do the homework.. BP is clearly a great place to start.. you could potentially invest in a 5+ unit MF with Little to nothing down and no personal income verification, again if the property supports it. I know I have seen multiple lenders advertising that style of loans.. One at least here on BP just another option.. *disclaimer* So far I personally know very little about commercial loans

Jeff Johnson · Answer

Thanks everyone. Looks like I need to bring down my debt before investing.

David S. · Answer

If you're already working two full time jobs you may want to focus on the debt aspect here before adding a rental home! Sure you have a relatively expensive mortgage and six kids, but I'd think you could pay down your debt relatively fast if you really got radical about things. Two car payments? Buy a few cars cash that are known to be reliable, sell the two with notes if you can do so without too much pain. Run the numbers; chances are this is your first good move. Then comes the highest interest debt first; the credit cards. Consolidate them first if you can, maybe wrap them into your mortgage if a refi makes sense and you have enough equity, just don't do it again, ever. Unless you have some serious fixed expenses you're not mentioning, I could pay off that debt with that mortgage and with that family in roughly 2 years, maybe even less. You just have to want it and get radical, though we'd still live perfectly comfortable lives. After that come back and talk rentals. Frankly if you can't pull that off, you may not want to get into more leverage on the rental front anyway.

Dennis M. · Answer

@Jeff Johnson Dang you weren’t lying . You do have major debt ! It would be sad to have to work two jobs to keep above water .life is so short to be doing that

Kyle Johnston · Answer

What's your LTV on your current house? Based on your income, you could carry about $8k in monthly payments before you would no longer be able to qualify for conventional financing. If you can't downsize without having a ridiculous commute, do you have equity available to do a cash-out refi and pay off the other debts to lower your total monthly payments? I'll send you a connection request too.